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“That will be a very exciting development in the marketplace, and is a very positive development for Viacom” the CEO says. His networks including Nickelodeon, MTV, Comedy Central and BET “have the largest share of viewing on pay TV for every demographic that we serve.”
But they’re priced low enough so that “you can offer that, and a few of our competitors, and still be at this very low price point.”
AMC Networks and Discovery Communications have also been talking to distributors about a low priced package that would include their channels — but not expensive sports networks such as Disney's ESPN.
Two weeks ago Discovery CEO David Zaslav forecast an entertainment-only bundle that might cost about $10, which he described as “a true skinny bundle in the spirit of what’s working around the world.”
Disney’s Bob Iger scoffed that such a low priced package probably would not include “any channels that were particularly attractive…I don’t see how that would be practical in terms of gaining much penetration.”
But new offerings with broadcast channels and sports that can cost about $40 a month — including Sling TV, DirecTV Now, and Hulu With Live TV — “are not well configured for driving incremental penetration,” Bakish says.
The price is “highly unlikely to bring in a cord never millennial,” he adds. “It might cause someone to churn down in terms of price…So that’s not the transformational opportunity.”
A much lower priced, entry level package could “be a path to bring someone in that wants high quality entertainment” and could either trade up from, or trade down to, “as the household needs change.”
He sees a drop in the number of subscribers paying $100 or more a month for the expanded basic bundle. Although there will be a $40 or so mid-tier offering “that’s not economically sustainable,” Bakish says. Those selling such a package now “say things like, ‘It’s very difficult to make money here’ — which is code for losing money on a variable basis.”
The bigger-than-expected drop in pay TV subscribers in Q1 might have reflected the end of the discounts that Time Warner Cable offered to boost its subscriber numbers while it was preparing for the deal to sell itself to Charter Communications.
“You may have had a situation where there was a larger sub base than there should have been,” Bakish says. “That got churned out as people focused on a quality on-going business.” He expects sub declines to “return to a more modest level.”
More broadly, Bakish says he’s looking to improve Viacom’s relationships with cable and satellite distributors which over the last few years became “a little bit frayed.”
He noted, for example, that under his predecessor, Philippe Dauman, some of “our largest and most important customers had inferior rights grants from a Viacom perspective to smaller [subscription video on demand] players. Think about that for a second. That doesn’t make any sense. But that’s where we were.”
Bakish has been trying to address that by revising carriage deals before they expire. “One of the things we’re focused on is broadening the relationship so it’s not just a brain damaged, zero-sum game negotiation about cost.”
For example, he says, two distributors now use Viacom's Vantage data to help local ad buyers target their sales pitches.
He noted that his company has “noise issues” with Charter — which has moved some Viacom channels to extra-cost tiers for new customers. “That’s something we firmly believe they don’t have the rights to do,” he says. “We’ve got to get that resolved.” But that’s “an outlier.”
Also, from Variety:
Viacom’s Bob Bakish: Entertainment-Only Pay TV Option Coming This Year
Viacom is in advanced discussions with at least one MVPD to be part of a low-cost, entertainment-only channel package designed to help bring younger consumers into the pay TV eco-system and to keep others from leaving.
Viacom CEO Bob Bakish spoke of the initiative Monday during his keynote breakfast at the J.P. Morgan Global Technology, Media and Telecom conference in Boston. Bakish referenced the slew of OTT skinny bundle offerings that are hitting the market at around $40. He told J.P. Morgan media analyst Alexia Quadrani that what he called the “entertainment pack” option would probably be priced around $10-$20.
The new breed of digital MVPDs are still not “transformational” opportunities for pay TV because they remain dominated by broadcast signals and sports. He doubted whether new offerings from YouTube, DirecTV Now and Hulu would have much appeal to what he called “cord-never millennials.”
“The transformational opportunity is to bring in a new entry segment at a much lower price point,” Bakish said. The industry needs “a path to bring in someone who wants high-quality entertainment” but doesn’t want to pay for sports channels. With a truly low-cost entertainment option, MVPDs can also offer more flexibility to consumers to “trade up from and trade down as the household needs change.”
Bakish emphasized during the Q&A that Viacom was focused on repairing “frayed” relations with its MVPD partner. Since Bakish took the helm in December, he’s met with leaders of the largest MVPDs and emerging digital MVPDs.
In some cases, Viacom has reached deals to expand on-demand access on traditional MVPDs to Viacom shows — agreements reached outside the context of broader carriage negotiations. “We had gotten to the place where our largest and most important (MVPD) customers had inferior rights grants than smaller SVOD players,” he said. In another case, Bakish said one large MVPD — he didn’t name names — has extended Viacom’s carriage deal “well into the next decade.”
Bakish quested whether the $40 price-point skinny bundles with sports and broadcast signals are viable products for distributors. He said one distributor of a $40 package acknowledge that the package has an underlying product cost of $46. “It’s unclear how long that can sustain,” he said.
Bakish acknowledged that there has been some “noise” in the marketplace between Viacom and Charter over what Bakish described as Charter putting Viacom channels on a higher service tier for new subscribers. “We firmly don’t believe they have the rights to do that,” he said. “We’ve been in discussions with them. We’ve got to get that resolved.”
On the big picture turnaround strategy at Viacom, Bakish talked up the growth of Nickelodeon and the strategy shift under way at MTV.
After hitting a slump a few years ago, Nickelodeon chief Cyma Zarghami went on a mission to expand its programming development pipeline, which is now bearing fruit. “We’re not the ‘SpongeBob’ network anymore,” he said, noting that it’s top four shows in live-action and animation are newer properties.
Nickelodeon is also key to the plan to revitalize Paramount. Bakish pointed to the animated feature “Amusement Park” set for release by Paramount next year, to be followed in 2019 by a series on Nickelodeon. Paramount and Nickelodeon had collaborated on branded movies in the past but this time around there is a much more defined strategy. “It’s a long-term plan with many properties in the pipeline,” he said.
At MTV, the shift in focus to lighter unscripted programming began rolling out in March under the direction of Chris McCarthy, who took on MTV in addition to VH1 and Logo in November. Bakish expects the next two months to be crucial with new series rollouts.
The goal is to boost numbers with teenagers and young women. MTV saw its ratings in those demos decline about 10% a year for the past five years after it embarked on an ambitious scripted programming push even though “there was no research that anyone was looking for scripted at MTV.”
Among other topics raised during the session:
Upfront: Bakish predicted a solid upfront given the tightness in TV supply and the concerns about the quality of digital advertising options. “It’s not that people are going to flee in mass from (digital) but in the context of going in to the upfront it highlights the quality and credibility of the product we sell,” he said.
Paramount Pictures: The new management team led by former Fox chief Jim Gianopulos is off and running with the goal of working much more closely with Viacom’s cable brands. “It’ll take a little time to build a new slate and bring it to market,” he said. “We’re feeling very good about the direction for Paramount.”
Cord Cutting: Bakish said some of the higher-than-expected pay TV losses recorded in the first quarter can be chalked up to churn resulting from post-M&A integration effort. He didn’t cite specifics but was likely referring to Charter and Time Warner Cable and Altice and Cablevision, and the possibility of weeding up subscribers that had been lured on the basis of heavy promotional offerings to plump up subscriber numbers ahead of a sale. “Some of the churn was around subscribers that were of less value (having) been acquired as one of the selling companies was positioning itself for a sale,” he said.
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